Forced Labor - articles- The Sweatshop Industry

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Source:
http://www.sweatshopwatch.org/swatch/industry/
May 15, 2003 - Content has not been altered except to remove links.

Sweatshop Watch

The Sweatshop Industry

What is a Sweatshop?
A sweatshop is a workplace where workers are subject to:

extreme exploitation, including the absence of a living wage or benefits,
poor working conditions, such as health and safety hazards, and
arbitrary discipline.
The U.S. General Accounting Office has developed a working definition of a sweatshop as "an employer that violates more than one federal or state labor, industrial homework, occupational safety and health, workers' compensation, or industry registration law."
Historically, the word "sweatshop" originated in the 19th century to describe a subcontracting system in which the middlemen earned profits from the margin between the amount they received for a contract and the amount they paid to the workers. The margin was said to be "sweated" from the workers because they received minimal wages for excessive hours worked under unsanitary conditions.
Today, the overwhelming majority of garment workers in the U.S. are immigrant women. They typically toil 60 - 80 hours a week in front of their machines, often without minimum wage or overtime pay. In fact, the Department of Labor estimates that more than half of the country's 22,000 sewing shops violate minimum wage and overtime laws. Many of these workers labor in dangerous conditions including blocked fire exits, unsanitary bathrooms, and poor ventilation. Government surveys reveal that 75% of U.S. garment shops violate safety and health laws. In addition, workers commonly face verbal and physical abuse and are intimidated from speaking out, fearing job loss or deportation.
Overseas, garment workers routinely make less than a living wage, working under extremely oppressive conditions. Fierce competition for cheaper labor costs -- as well as the liberalization of trade barriers -- has brought apparel production to countries where workers have little bargaining power and where authoritarian governments squash worker organizing. U.S. retailers and manufacturers are reaping enormous profit in the garment industry, setting wages with little relation to productivity. "In Mexico, for example, apparel worker are 70% as productive as their U.S. counterparts, yet they earn just 10% as much per hour," according to surveys by Kurt Salmon Associates Inc. (see chart below).
Sweatshops can be viewed as a product of the global economy. Fueled by an abundant supply of labor in the global market, capital mobility, and free trade, garment industry giants move from country to country seeking the lowest labor costs and the highest profit, exploiting workers the world over.
Apparel Manufacturing in 1998, in U.S. dollars

Country Productivity
(Index) Hourly Compensation
(includes wages & benefits)

U.S. 100 $8.00

Dominican Republic 70 1.15

Malaysia 65 1.15

Mexico 70 0.85

Guatemala 70 0.65

Thailand 65 0.65

Indonesia 50 0.15

DATA: Kurt Salmon Associates

The Wage Gap

The examples below illustrate the wide gap between what garment workers bring home and what their families need to live dignified lives. Workers should be earning a living wage that allows their families to meet their basic needs.

Fundacion Nacional para el Desarrollo, or the National Foundation for Development, an NGO research organization in El Salvador, establishes the basic basket of necessities for the average sized Salvadoran family (4.3 people) to survive in "relative poverty" as $287.21 per month. In El Salvador, workers at Doall Enterprises make $0.60/hour. This meets only 51% of a basic basket of goods necessary to survive in relative poverty.
SOURCE: "Liz Claiborne/Sweatshop Production in El Salvador," September 17, 1998, National Labor Committee

According to a U.S. Commerce Department report (February 17, 1998), "The minimum wage [in Honduras] is considered insufficient to provide for a decent standard of living for a worker and family." $0.43 per hour, or $3.47 per day, is the base wage for garment workers in the Evergreen factory in Honduras, meeting only 54% of the cost of survival, meanwhile inflation is expected to reach 13.7% next year, eating away the purchasing power of workers' wages. When transportation to and from work, breakfast and lunch costs $2.59, that leaves only $0.80 a day for families' other basic needs.
SOURCE: "Wal-Mart Sweatshops in Honduras," November 17, 1998, National Labor Committee

According to independent labor rights organizations in Hong Kong, a living wage in China would be about $0.87/hour. Minimum wage rates vary as they are set by each provincial government, however, they do not meet this living wage. Shanghai's minimum is $0.21/hour, and Guangzhou's $0.26/hour.
SOURCE: "Behind the Label: Made in China," March 1998, Charles Kernaghan/National Labor Committee

Garment workers in Los Angeles, California who are mostly paid a piece-rate average $7,200 a year, less than 3/4 of the poverty level income for a three-person family.
SOURCE: Report from the Los Angeles Jewish Commission on Sweatshops, January 1999

What Causes Sweathops in the Garment Industry?
The very structure of the garment industry encourages the creation of sweatshops. Retailers sit at the top of the apparel pyramid, placing orders with brand-name manufacturers, who in turn use sewing contractors to assemble the garments. Contractors recruit, hire and pay the workers, who occupy the bottom level of the pyramid. In many countries, competitive bidding by these contractors for work drives contract prices down so low that they cannot pay minimum wages or overtime to their workers. In fact, in today's garment industry, very little competitive bidding takes place. Most contractors are put in a "take it or leave it" position and must accept whatever low price is given to them or see the work placed elsewhere. The contractors must "sweat" profits out of their workers, cut corners, and operate unsafe workplaces.
Retailers have acquired enormous power to determine the price of clothing. During the past decade retailing has experienced a series of major mergers, which has led to a considerable consolidation of their buying power, especially among discounters. Today, for example, Wal-Mart's annual sales are nearly $118 billion, and Kmart's are $32 billion. These two retail giants alone outsell all department stores combined; their purchasing decisions shape much of the apparel industry. The ten largest retailers account for nearly two-thirds of all apparel sales in the U.S. This consolidated buying power vastly increases retailers' ability to put more pressure on the manufacturers in terms of price and speed. Some retailers, such as May Department Stores, insist that manufacturers making their private labels guarantee a profit margin, sometimes as high as 48%. This impossible goal forces down wholesale prices, and it is ultimately the worker at the sewing machine that feels the pinch. The $100 sale price of a garment is typically divided up as follows: $50 to the retailer, $35 to the manufacturer, $10 to the contractor, and $5 to the garment worker.
Retailers also control the apparel industry by producing their own private labels instead of buying from brand-name manufacturers. Retailers contract for the production of, oversee, and price garments created exclusively for their stores. Approximately 32% of women's apparel sold in the U.S. is manufactured under private labels. While retailers typically keep 50% of the price of brand-name goods, they are able to keep 80% of the price of their own private label products.

J.C. Penny's Arizona Jeans Co., one of the industry's most successful private labels, brings in over $1 billion in annual sales. Private labels represent 50% of the store's annual sales, which were $16 billion in 1997.
Federated Department Stores' seven "power brands" (INC/International Concepts, Charter Club, Alfani, Tools of the Trade, Arnold Palmer, Style & Co., and Badge) represent $1 billion in annual sales, or 15% of the company's business.

Retailers' domination of the garment industry means they can affect whether sweatshop conditions improve or worsen. With their power to control production, retailers, along with manufacturers, should be held accountable for the conditions of the workers who sew their clothes.

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